Streetwise for Sunday, January 16, 2021
People often ask me why I have such confidence in the American economy and specifically American industrial strength. To answer that question, I am going to draw on some comments I wrote about a year ago.
If we think about American industry from a historical perspective, the saying that the more things change, the more they stay the same appears to bear fruit. Consider the following:
It was early in the 19th century, railroads and telegraph were the two greatest means of traveling and communicating. Yet, there was another means of communicating. It was through a catalog of 1,184 pages. Anything and everything a person could want could be ordered and shipped to whatever destination you desired using a Sears, Roebuck & Company catalog.
By 1908, if you so desired and had the skill, along with a few friends to help, you could even purchase a house that would be shipped to you as a kit for as little as $725.
Ordering from a catalog and have your order shipped to your location by mail or rail was a uniquely American institution necessitated by life on the frontier in the late 19th century.
Looking back in time, the catalog trade was established by two companies. The first was Montgomery Ward & Company, founded in Chicago in August of 1872 by Aaron Montgomery Ward and the second was established in 1886 by Richard Warren Sears, a railroad station agent who started selling watches out of Minneapolis, Minnesota, through a chain of railroad station depots.
Sears' venture became lucrative, and he subsequently moved to Chicago in 1877 and hired a watch repairman named Alvah Curtis Roebuck. A couple of sales and mergers later and the two men in 1893 renamed their venture Sears, Roebuck & Company, headquartered in Chicago.
By 1908 the company had grown into the largest retailer in America and expanded into manufacturing and retailing at discounted prices. At that point there was literally nothing a man or woman could want, no matter where they lived, that could not be ordered from the Sears catalog's booming 1,184 pages of products.
The catalog shipped free of charge to any address in America and its products sold with a money back guarantee if the customer was not satisfied. Everyone from New York to New Mexico could find what they needed and have it shipped right to their door, regardless of location.
In 1908, Richard Sears decided to resign as president and became chairman of board. However, he shortly retired completely after that and died six years later, September 14, 1914, at the age of 50, leaving behind a legacy of offering every American, no matter where they lived in the country, the ability to order whatever they needed and have it delivered to their door.
Today Sears is but a remnant of itself. Shredded by poor management the company has spent about a year in bankruptcy as creditors fight like vultures over dead carrion.
Unfortunately, Sears is not alone among the iconic names of American business to fall prey to changing times. Yet, as a forest devastated by wildfire begins a path of recovery with hundreds of new green shoots, so it is with American industry.
For example, AT&T was reborn as a new and different company, as was General Motors. The latter has seen the handwriting on the wall and totally embraced the move to electric vehicles.
Sitting on the driver seat of his beloved Corvette, President Joe Biden was quoted as saying about the American car industry, "...I believe we can own the 21st century market again by moving to electric vehicles."
Biden's then went on to say, "And by the way, they tell me, and I'm looking forward to driving an electric Corvette that can go 200 mph. You think I am kidding? I am not."
He was reiterating the statement made by the President of General Motors, Mark Reuss, "electric vehicles would be a true mark of progress toward a world of zero emissions."
And here comes Amazon. The Wall Street Journal once pointed out that more fulfillment centers near residential areas would mean a speedy "last mile" of delivery for Amazon. Amazon is truly focused on its "last mile" of delivery. Not only have they recruited new drivers to deliver goods, but they are toying with the idea of using drones for delivery.
Meanwhile, there have been discussions exploring the idea of converting empty spaces in malls into large retail distribution centers.
According to The Wall Street Journal, the talks reflect the intersection of two trends that predate the pandemic but have been accelerated by it: the decline of malls and the boom in e-commerce.
Lauren Rudd is a Managing Director with Raymond James & Associates, Inc., member NYSE/SIPC. Contact him at 941-706-3449 or Lauren.Rudd@RaymondJames.com. All opinions are solely those of the author. This material is provided for informational purposes only, is not a recommendation and should not be relied on for investment decisions. Investing involves risk and you may incur a loss regardless of strategy selected. Past performance is no guarantee of future results.